tuxis techs., llc v. amazon.com, inc., c.a. no. 13-1771-rga (d. del. sept. 3, 2014)

8/11/2019 Tuxis Techs., LLC v. Amazon.com, Inc., C.A. No. 13-1771-RGA (D. Del. Sept. 3, 2014).

1/11

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

TUXIS TECHNOLOGIES, LLC,

Plaintiff,

V

Civil Action No. 13-1771-RGA

AMAZON.COM, INC.,

Defendant.

MEMORANDUM OPINION

Brian E Farnan, Esq., FARNAN LLP, Wilmington, DE; Andrew G Heinz, Esq. argued),

DESMARAIS LLP, New York, NY.

Attorneys for PlaintiffTuxis Technologies, LLC.

Steven J Balick, Esq., ASHBY GEDDES, Wilmington, DE; William H Baumgartner, Jr.,

Esq. argued), SIDLEY AUSTIN, LLP, Chicago, IL.

Attorneys for Defendant Amazon.com, Inc.

Septembe3_

2014


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Before the Court is the Motion of Amazon.com, Inc. to Dismiss for Failure to State a

Claim. (D.I.10).

Themotionisfullybriefed(D.I.11, 12 14)andoralargumentwasheldon

May 23, 2014. (D.I. 21). For the reasons that follow, Amazon.com Inc.'s Motion is granted

with respect to claim 1.

1

I B CKGROUND

This is a patent infringement case filed by Tuxis Technologies, LLC on October 29,

2013. (D.I. 1 . Tuxis alleges infringement

of

the 6,055,513 ( the '513 patent ) against

Amazon.com, Inc. The '513 patent relates to a method

of

upselling, and the patentees describe

the invention as follows:

Apparatus and methods are provided for effecting remote commerce, such

as in telemarketing (either inbound or outbound) and in electronic commerce,

which are particularly adapted for the intelligent selection and proffer ofproducts,

services or information to a user or customer. In one aspect of the invention,

goods, service[

s]

or information are provided to the user via electronic

communication, such as through a telephone, videophone or other computer link,

as determined

by

the steps of first, establishing communication via the electronic

communications device between the user and the system to effect a primary

transaction or primary interaction, second, obtaining data with respect to the

primary transaction or primary interaction, including at least in part a

determination

of

the identity of the user or prospective customer, third, obtaining

at least a second data element relating to the user, fourth, utilizing the primary

transaction or primary interaction data along with the at least second data element

as factors in determining at least one good, service or item of information for

prospective upsell to the user or prospective customer, and offering the item to the

prospective customer. In the preferred embodiment, the selection of the proffer of

goods, services or information comprises

an

upsell with respect to the primary

transaction or primary interaction data. The offer

of

the upsell is preferably

generated and offered in real time, that is, during the course

of

the communication

initiated with the primary transaction or primary interaction.

1

Claim 1 is the only claim that received any significant attention during the briefing and oral argument. Therefore,

the Court's invalidity determination is confined to that claim.


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'513 patent, Abstract. Claim 1 of the '513 patent

is

representative of the numerous asserted

claims. Claim 1 recites:

A method for providing offers

in

real

time

of

an

item constituting a good or

a service

in

the form

of

offers for purchase

of

the item to prospective customers as

users of the system, utilizing an electronic communications device, comprising the

steps of:

establishing a communication via the electronic communications device

between the user and the system for [the] purpose of a

user

initiated

primary

transaction for purchase of a specific good or service,

obtaining primary transaction data with respect to the primary transaction,

including the identity of the prospective customer and of the good or service for

purchase

in

the

primary

transaction,

generating an upsell offer as a result

of

he user initiated primary transaction

by:

utilizing the identity

of

the prospective customer to obtain at least a

second data element relating to the user,

utilizing at least

in

part the

primary

transaction data including the

identity of the good or service of the primary transaction and the second data

element and determining at least

one

item for a prospective upsell transaction with

the prospective customer, and

offering the item to the prospective customer and receiving an acceptance

of the offer from at least one user

in

real

time

during the course of the user initiated

communication.

Id. claim 1 The term ''upsel l is defined in the patent to be an offer

or

provision of a good or

service which is selected for offer to the customer and differs from the good or service for which

the primary contact was made. Id at 13 :38-41. The patentee defined real time as during the

course of the communication initiated with

the

primary transaction

or

primary interaction.

Id

at

Abstract.

In response, Amazon asserts the '513 patent's claims are invalid because they do not

claim patent-eligible subject matter under 35 U.S.C. 101.

2


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II LEGALSTANDARD

At the motion to dismiss stage a patent claim can be found directed towards patent

ineligible subject matter

if

the

only

plausible reading

of

the patent

must

be that there is clear and

convincing evidence

of

ineligibility. Ultramercial, Inc v Hulu, LLC, 722 F.3d 1335, 1339

(Fed. Cir. 2013) (emphasis in original),

vacated,

134 S Ct. 2870 (2014).

3

Section

101

provides

that, Whoever invents

or

discovers any

new

and useful process, machine, manufacture, or

composition of matter,

or

any

new

and useful improvement thereof,

may

obtain a patent therefor,

subject to the conditions and requirements

of

this title. 35 U.S.C. 101. To this broad

statement

of

what can be protected

via

a patent, the Supreme Court has recognized three narrow

categories

of

subject matter outside the eligibility bounds

of

10

I - laws of

nature, physical

phenomena, and abstract ideas.

Ultramercial,

722 F.3d at 1341. The purpose

of

these carve

outs are to protect the basic tools

of

scientific and technological work.

Mayo Collaborative

Servs. v Prometheus Labs., Inc., 132 S Ct. 1289, 1293 (2012). However, a process is not

unpatentable simply because it contains a law

of

nature or a mathematical algorithm, but

an

application

of

a law

of

nature or mathematical formula to a known structure or process may well

be deserving of patent protection. Id at 1293-94 (quotation marks and italics omitted). The

[Supreme Court] has made clear [that] to transform an unpatentable law

of

nature into a

patent-eligible application

of

such a law, one must do more than simply state the law of nature

while adding the words

'apply it. ' Id

at 1294 (emphasis omitted).

2

The Court issued an oral order directing Tux s to identify the asserted claims

in

the '513 patent and provide

proposed constructions for any claim terms it believed required construction. Tuxis indicated that two important

terms, up sell and real time, are defined

in

the patent and that the remaining terms in the asserted claims

of

the

'513 patent are used

in

accordance with their plain and ordinary meaning, and thus do not require construction.

(D.1.15,p.1).

3

Although the Supreme Court vacated and remanded the

Ultramercial

decision for further consideration

in

light

of

its recent opinion in Alice Corp., I do not believe any of the propositions for which I cite Ultramerical have been

overruled.

3


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The Supreme Court recently reaffirmed the framework laid out in Mayo for

distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from

those that claim patent-eligible applications

of

those concepts.

Alice Corp. Pty. Ltd. v CLS

Bank Int' ,

573

U.S ._ at

slip op., at 7) (2014). First, the court must determine whether

the claims are drawn to a patent-ineligible concept. Id f he answer is yes, the court must look

to the rest of the claim to see ifthere is an ' inventive concept -i.e., an element or combination

of

elements that is 'sufficient to ensure that the patent in practice amounts to significantly more

than a patent upon the [ineligible concept] itself. ' Id (alteration in original); see also Accenture

Global Servs.,

mbH v

Guidewire Software, Inc.,

728 F.3d 1336, 1341 (Fed. Cir. 2013) ( [T]he

court must first 'identify and define whatever fundamental concept appears wrapped up in the

claim.' Then, proceeding with the preemption analysis, the balance of the claim is evaluated to

determine whether 'additional substantive limitations

. . .

narrow, confine, or otherwise tie down

the claim so that, in practical terms, it does not cover the full abstract idea itself. ' (internal

citation omitted)). Furthermore, the prohibition against patenting abstract ideas cannot be

circumvented by attempting to limit the use

of

the formula to a particular technological

environment or adding insignificant postsolution activity. Bilski v Kappas, 130 S Ct. 3218,

3230 (2010) (internal quotation marks omitted).

III DISCUSSION

In

applying the framework set out above, it is clear that the claim 1 of the '513 patent is

drawn to unpatentable subject matter.

t

claims the fundamental concept

of

upselling-a

marketing technique

as

old as the field itself. While the additional limitations

of

the claim do

narrow its scope, they are insufficient to save it from invalidity.


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1

Fundamental Concept

Claim 1 is a method claim, and therefore falls within the statutory class of processes. See

35 U.S.C. lOO b). Amazon argues that claim 1 is directed to the basic idea of offering

something to a customer based on his or her interest in something else, a concept that has been

a cornerstone of commercial activity since time immemorial. (D.I. 11, p. 9). t simply

deconstruct[s] the abstract concept of cross-selling

4

into a series

of

constituent and inherent steps

according to which a customer makes contact with a merchant for the purpose of one purchase

transaction, and the merchant offers a second purchase transaction. Id. at p. 10 (footnote

added)). Tux.is agrees upselling is an abstract idea. (D.I. 12, p. 7). Instead, Tuxis argues that

the claims are patent-eligible because they are meaningfully limited and do not pre-empt use of

that abstract concept. Id Because the parties are in accord regarding the classification of

upselling as an abstract idea,

the 101

analysis progresses to the second step.

2 Preemption Analysis

Once an abstract idea is identified, the Court must perform a preemption analysis and

determine whether the remainder of the claim includes limitations that narrow, confine, or

otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea

itself. Accenture, 728 F.3d at 1341. [T]he relevant inquiry is whether a claim, as a whole,

includes meaningful limitations restricting it to an application, rather than merely an abstract

idea. Ultramercial, 722 F.3d at 1344 (emphasis omitted). A claim that recites an abstract idea

must include 'additional features' to ensure ' that the [claim] is more than a drafting effort

designed to monopolize the [abstract idea]. ' Alice Corp, 573 U.S . _

at

slip op., at 11)

(alterations in original). After analyzing the additional limitations imposed by claim 1 of the

4

Amazon uses cross-selling and upselling interchangeably.

n

order to maintain consistency with the

nomenclature, the Court will refer to the method embodied in the claims as upselling.

5


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'513 patent, the idea of upselling has not been sufficiently limited to prevent the claim from

cover[ing] the full abstract idea itself Accenture, 728 F.3d at 1341.

Tuxis maintains that claim 1 does not pre-empt the concept

of

upselling because the

claim limitations sufficiently narrow its scope. The full text of claim 1 is provided above, but it

can be broken down into the following main steps:

1 establishing a communication with a user over an electronic communications device

wherein the user initiates the purchase of a good or service;

2) obtaining data about: the user's identity, the good or service purchased, and a second

data element relating to the user;

3) generating an upsell offer based on the second data element related to the identity of

the user and the good or service purchased;

4) offering the upsell item and receiving an acceptance in real time.

According to Tuxis, prior methods ofupselling suffered from information deficits and therefore

were unable to accurately predict what the customer wants. (D.I. 12, p. 2). The method

embodied in claim 1, Tuxis argues, overcomes this by basing its upsell recommendation on novel

combinations ofdata, namely the identity of the good or service of the primary transaction and

the second data element [related to the user].

Id.

at p. 8 (alteration in original)). Moreover, the

whole transaction is performed in real time using an electronic communications device. '513

patent, claim 1. Based on these limitations, Tuxis highlights twelve large classes ofpreviously

known upsell techniques that are excluded by claim 1

s

limitations, including:

1 upselling not based on remote commerce, 2) upselling based on the customer's

prior purchasing history but not the identity of the primary good or service, 3)

upselling based on the amount a customer has spent in the past but not the identity

of the primary good or service, 4) upselling provided some time after the primary

transaction, 5) upselling based on how long ago a customer shopped at the business

but not the identity of the primary good or service, 6) upselling based on items

6


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infrequently purchased in the past but not the identity of the primary good or

service, 7) upselling based on loyalty card information

or

reward systems, 8)

upselling based on history of coupon use y a customer but not the identity

of

the

primary good or service, 9) upselling not based on a primary transaction, 10)

upselling based on pushed goods or services provided in a non-targeted manner,

11) upselling based on the current purchase but not on information about the

customer, and 12) upselling based on information about other people or groups

of

people, but not on information relating to the customer.

(D.I. 12, pp. 8-9).

None

of

the limitations recited

y

Tuxis, however, are meaningful. Ultramercial, 722

F 3d at 1344. Although the claim elements have some narrowing effect on the scope of claim 1,

the practical effect is insubstantial, as evidenced

y

the categories

of

upselling provided

y

Tuxis

that are not covered

y

claim 1. Six

of

the twelve categories reserved for the public involve

recommending a second item without using the identity

of

the good

or

service purchased in the

initial transaction (D.I. 12, pp. 8-9 (numbers 2, 3, 5, 6, 8, and 9)), and two more do not rely on

information relating to the customer.

Id.

(numbers 11 and 12)). The four remaining categories

are: upselling not based on remote commerce, upselling not conducted in real time, upselling

based on loyalty card information, and upselling based on non-targeted pushed goods. Id.

(numbers 1, 4, 7, and 10, respectively)). Reserving for the public these narrow methods

of

upselling does not meaningful[ly] limit the abstract idea. Allowing claim 1 would permit the

general concept

of

upselling to

e

patented, which pre-empts its use in all fields and effectively

grant[s] a monopoly over an abstract idea. Bilski, 130 S. Ct. at 3231.

Additionally, claim 1 lacks an inventive concept. There is no element or combination

of

elements that is 'sufficient to ensure that the patent in practice amounts to significantly more

than a patent upon the [ineligible concept] itself. ' Alice Corp, 573 U.S.

_ at

slip op., at

7 (alteration in original). Claim 1 requires nothing more than suggesting an additional good or

service, in real time over an electronic communications device, based on certain information

7


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obtained about the customer and the initial purchase. Shrewd sales representatives have long

made their living

off

of this basic practice. A simple hypothetical is instructive: A man enters a

clothing store to purchase a new pair of dress slacks ( a user initiated primary transaction for the

purchase

of

a good or service ). The sales representative assists the man in finding a pair

of

pants, and in the process learns that the man is a banker ( a second data element relating to the

[identity

of

the customer] ). Knowing that suspenders are fashionable in the banking profession,

the sales representative offers the banker a pair

of

suspenders that match his pants (''utilizing at

least in part the primary transaction data including the identity of the good or service of the

primary transaction and the second data element [related to the customer] and determining at

least one item for a prospective upsell ). The customer agrees with the sales representative and

purchases the suspenders ( receiving an acceptance of the offer

. . .

in real time ). This type of

marketing strategy is at the heart

of

claim 1 and has been practiced as long as markets have been

in operation. Conduct this transaction on an electronic communications device instead

of

in a

physical store and it would be an infringing sales practice if claim 1 were valid. This cannot

e

permitted,

as

it would tend to impede innovation more than it would tend to promote it. Mayo,

132 S Ct. at 1293.

Moreover, the fact that the upsell item can

e

recommended in real time using a

computer does not save claim 1 because the computer must be integral and facilitate the

process in a way that a person making calculations or computations could not. Bancorp Servs.,

L.L.C.

v

Sun Life Assurance

Co

o

Can

US.),

687 F.3d 1266, 1278 (Fed. Cir. 2012) ( [T]he

fact that the required calculations could

e

performed more efficiently via a computer does not

materially alter the patent eligibility of the claimed subject matter. ); Alice Corp, 573 U.S . _

at

slip op., at 15) (invalidating claims that amounted to 'nothing significantly more' than

8


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an instruction to apply the abstract idea o intermediated settlement using some unspecified,

generic computer ); Dealertrack Inc. v Huber 674 F.3d 1315, 1333 (Fed. Cir. 2012) ( Simply

adding a 'computer aided' limitation to a claim covering an abstract concept, without more, is

insufficient to render the claim patent eligible. ). As demonstrated above, a computer is not an

integral part o the claim here. A human being can generate an upsell recommendation during

the course o the user initiated communication, although perhaps not with the efficiency or

speed

o

a computer. The computer performs nothing more than purely conventional steps that

are well-understood, routine, and previously known to the industry.

See Alice Corp

573 U.S.

_ at_

slip op., at 15). Therefore, the addition

o

an electronic communications device

does not save claim 1 from invalidity.

Finally, to the extent the Plaintiff argues the patent in this case is similar to the patent

in

Ultramercial

and therefore should be found to be patentable, the Court disagrees.

In Ultramercial the Federal Circuit found that the claim was patentable in part because the patent

claimed a particular internet and computer-based method for monetizing copyrighted

products. Ultramercial 722 F.3d at 1350. According to the Federal Circuit, the claim

[in Ultramercial] appears far from over generalized, with eleven separate and specific steps with

many limitations and sub-steps in each category.

Id.

at 1352-53. n addition, the steps recited

in Ultramercial were more than token pre- or post-solution steps, i.e. they are central to the

solution itself.

Id.

at 1347, 1352. Here the '513 patent fails to limit claim 1 other than to

confine the claim to real time upsell offers based on particular pieces

o

information that are

transmitted over an electronic communications device. This is not a practical application with

concrete steps, and is far less patentable then what was claimed in

Ultramercial.

Claim 1

simply append[s] conventional steps, specified at a high level

o

generality, to an abstract


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idea. Mayo 132 S.Ct. ..at 1300. The Supreme Court 's decision to vacate and remand

Ultramercial to the Federal Circuit for further Consideration

in

light

of

Alice Corp further

undercuts any reliance on this precedent.

Because the evidence is clear and convincing that claim 1

of

the '513 patent is directed

towards an unpatentable abstract idea, it is invalid under 35 U.S.C. 101.

5

IV. ON LUSION

For the reasons stated above, the Motion

of

Amazon.com, Inc. to Dismiss for Failure to

State a Claim (D.I. 10) is granted with respect to claim

1

n appropriate Order will follow.

5

The machine-or transformation test, which is no longer the sole test for patentability, does not alter

my

view on

the patentability of claim

1

Bilski 130 S Ct. at 3225-26.

10

tuxis techs., llc v. amazon.com, inc., c.a. no. 13-1771-rga (d. del. sept. 3, 2014)

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